How To Triple Check Your Offer Price

Three ways to ensure you’re paying the right price for the house

It’s the number one fear in buyer’s minds: paying too much for a home.  And rightly so, because overpaying now means that you won’t make as much when you go to sell years down the road, and you may be paying interest on an inflated amount for that whole stretch of time.  You want your future self to thank you for negotiating a good deal.

So how do we know what a fair price is?  First, check your gut.  You’ve been personally shopping the neighborhood for months, tapping every pin on the Zillow map and comparing features, price, and location.  You’re practically an expert; a discerning shopper.  Trust your gut.  If it’s saying “$700k for THAT?” Then it’s probably a good idea to offer less.

After gut instinct comes the scientific approach.  The best method is still examining comparable sales, or more crudely, “comps.”  It the surest way of determining value, because it accounts for similar recent sales and helps forecast what an appraiser will consider.  Think of how a school of fish move together, so individual home sales tend to follow one another, matching the market pace by flowing up or flowing down.  Match your offer price to the fair market value (or slightly less, depending on the scenario), and you know you’ve locked in a good purchase amount.

And finally, an appraiser typically steps in to dive deeper into the realm of comparable sales.  These ultimate number crunchers make it their full time job to offer their professional opinion on a home’s value.  They’re usually required by mortgage lenders during the “under contract” phase of the sale, but some private cash buyers may also utilize their service. Think of it as a check-and-balance on the market, ensuring your lender (and you!) only pays a fair price based on actual market value.

Your gut, your agent, and your appraiser. Three ways to identify the right price.